Unpegging the Hong Kong dollar peg

CHINA ADVISORY - Report 13 Feb 2025 by Andrew Collier

Given the difficult state of Hong Kong’s economy, and more broadly its role in the world, it is not surprising that we are seeing speculation about how the city will refashion itself under tighter mainland control. There are concerns about the direction of the economy; the strength of its pillar industry—property; and the degree of tightening by Beijing.

One question is the Hong Kong dollar peg to the U.S. dollar. The Hong Kong dollar’s value has been tied to the U.S. dollar since 1983 and it trades within a narrow range of 7.75 to 7.85 per dollar. In 2022, hedge fund manager Bill Ackman announced he was betting against the HKD. Others have speculated against it in the past. Andrew Sinclair, a Yale PhD and former finance professor at the University of Hong Kong, and now at the California Institute of Technology, has written a paper speculating that China cannot globalize its financial system unless it takes drastic measures, which could include repegging the Hong Kong dollar to the renminbi rather than the U.S. dollar. I don’t agree with his thesis but his arguments are worth considering.

Now read on...

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